Johnson & Johnson Earnings Cheat Sheet: Shrinking Margins for Fifth Consecutive Quarter, but Net Income Rises

S&P 500 (NYSE:SPY) component Johnson & Johnson (NYSE:JNJ) reported its results for the third quarter. Johnson & Johnson is a holding company involved in the research and development, manufacture and sale of a range of health care products.

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Johnson & Johnson Earnings Cheat Sheet for the Third Quarter

Results: Net income for Johnson & Johnson rose to $3.44 billion ($1.15 per share) vs. $3.42 billion ($1.23 per share) in the same quarter a year earlier. This marks a rise of 0.8% from the year earlier quarter.

Revenue: Rose 6.8% to $16 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: JNJ reported adjusted net income of $1.24 per share. By that measure, the company beat the mean estimate of $1.21 per share. Analysts were expecting revenue of $16.02 billion.

Quoting Management: “Our solid results this quarter reflect the success of many of our recently launched products,” said William C. Weldon, Chairman and Chief Executive Officer. “As we near the completion of our 125th year in business, our people continue to deliver new products, innovative pipelines and expand our global presence in ways that position us well to drive long-term growth and meet significant unmet medical and customer needs.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell one percentage points to 68.3% from the year earlier quarter. Over that time, margins have contracted on average 0.8 percentage point per quarter on a year-over-year basis.

Last quarter’s profit increase breaks a streak of three consecutive quarters of year-over-year profit decreases. In the second quarter, net income fell 19.5% from the year earlier, while the figure dropped 23.2% in the first quarter and 12% in the fourth quarter of the last fiscal year.

The company has now topped analyst estimates for the last three quarters. It beat the mark by 4 cents in the second quarter and by 10 cents in the first quarter.

Revenue has now gone up for three straight quarters. In the second quarter, revenue rose 8.3% to $16.6 billion while the figure rose 3.5% in the first quarter from the year earlier.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from $1.13 per share to $1.12, indicating that analysts are growing pessisimistic about the company’s performance next quarter. For the fiscal year, the average estimate has moved down from $4.97 a share to $4.96 over the last thirty days.

Competitors to Watch: Merck & Co., Inc. (NYSE:MRK), Pfizer Inc. (NYSE:PFE), Abbott Laboratories (NYSE:ABT), Eli Lilly & Co. (NYSE:LLY), GlaxoSmithKline plc (NYSE:GSK), Novartis AG (NYSE:NVS), Medtronic, Inc. (NYSE:MDT), Roche Holding Ltd. (RHHBY), Boston Scientific Corp. (NYSE:BSX), and Amgen, Inc. (NASDAQ:AMGN).

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(Source: Xignite Financials)